A life insurance agent is reviewing the estate plan for Mr. and Mrs. Dubois, a high-net-worth couple in New Brunswick. They have substantial assets, including a family cottage, investment properties, and a significant investment portfolio. Their Wills leave everything to each other and then to their children. They are concerned about potential estate administration taxes (probate fees) upon the death of the second spouse. Which of the following strategies is most effective in mitigating probate fees for assets intended for their children after both spouses have passed?

Question: A life insurance agent is reviewing the estate plan for Mr. and Mrs. Dubois, a high-net-worth couple in New Brunswick. They have substantial assets, including a family cottage, investment properties, and a significant investment portfolio. Their Wills leave everything to each other and then to their children. They are concerned about potential estate administration taxes (probate fees) upon the death of the second spouse. Which of the following strategies is most effective in mitigating probate fees for assets intended for their children after both spouses have passed?

Answer options:

• Designate their children as direct beneficiaries of their life insurance policies.
• Hold all assets in joint tenancy with their children immediately. ✅ Create an alter ego trust or a joint partner trust to hold certain assets, with their children as residual beneficiaries.
• Gift a portion of their assets to their children annually, up to the gift tax limit.

Correct answer: Create an alter ego trust or a joint partner trust to hold certain assets, with their children as residual beneficiaries.

Explanation: Alter ego trusts (for single settlors) or joint partner trusts (for couples) allow assets to be transferred into the trust during lifetime, bypassing probate upon the death of the last surviving settlor, while maintaining control and income for the settlors during their lifetime. Assets in the trust are not part of the estate for probate purposes.